ࡱ> vxw5@ 0y5bjbj22 NXX]-Z'Z'Z'8'D'k''" ( ( (T)T)T)xkzkzkzkzkzkzk$mRokW*T)T)W*W*k ( (4k,,,W* ( (xk,W*xk,b,'-aj (' ;v#Z'*xh>Lk,k0khpg+jp|jpjT)"v),))T)T)T)kk$!d+!Final Report submitted to the David and Lucile Packard Foundation by the IGCC Financing Project Energy Technology Innovation Project Belfer Center for Science & International Affairs John F. Kennedy School of Government Harvard University September 2005 The IGCC Financing Project (Project) was initiated at the Kennedy School of Government, Harvard University in July, 2003 to work on developing an innovative financing and regulatory program that could be used to stimulate commercial deployment of Integrated Gasification Combined Cycle (IGCC) power plants in this decade. The Project conducted research on several major hurdles to commercial IGCC deployment, including economic competitiveness, availability of low-cost capital, and technology risk concerns. The Project completed this research and published a working paper in July, 2004, outlining a financing and regulatory approach to simulate deployment. After publishing the working paper, the Project began focusing on communicating its ideas and identifying other opportunities for gasification technology deployment, including gasification to replace increasingly costly natural gas at industrial facilities. The Project developed a National Gasification Strategy that was published as a second working paper and provided the basis for testimony to the Senate Energy Committee in January and April, 2005. The Project also published several articles and gave numerous presentations on gasification deployment issues. These efforts, which are described in detail below, have had a significant impact in helping shape the course of debate around gasification and positioned the Project as a leading voice in federal discussions regarding the role gasification should play in U.S. energy policy. The Project was gratified to see the fundamental principals behind its proposals incorporated into the Energy Policy Act of 2005, which contains significant incentives to accelerate deployment of gasification technologies for both power generation and industrial use. The incentives include investment tax credits (20%) and federal loan guarantees available for up to 80% of project costs. The Project was particularly involved in helping the Senate consider and craft the loan guarantee incentives, which will help make production of syngas extremely competitive with natural gas for industrial uses and enable integrated gasification combined cycle (IGCC) power plants to produce electricity at prices below conventionally financed pulverized coal or natural gas power plants. The Project looks forward to continuing its work with a focus on assisting the timely implementation of Energy Policy Act gasification incentive programs. Project History & Accomplishments The IGCC Financing Project was a two year project carried out in three Phases. The activities and accomplishments of each of these are described below. Attached in Appendix A are the following documents relating to project activities: Executive Summary of 3Party Covenant Paper National Gasification Strategy Paper Article in Forbes Magazine April 21, 2005 Senate Energy Committee Testimony Article in Public Utility Fortnightly Salazar National Gasification Strategy Bill Summary of Energy Policy Act of 2005 Gasification Incentives Phase I (July 1December 31, 2003) Phase I focused on background research on IGCC and its barriers to commercial deployment. The Project researched the technical and economic status of IGCC, state and federal utility regulations impacting its deployment, issues of risk apportionment, and financial barriers to IGCC deployment. The Project closely examined different financing approaches that could improve IGCC project economics and provide a risk tolerant investment environment. An important aspect of the Projects research was to open dialogue with major coal producers and coal power plant developers, environmental organizations, Wall Street investment bankers, technology vendors, state public utility commissions, and federal officials at DOE, EPA, and CEQ. The Project developed an initial concept paper in December 2003 describing the 3Party Covenant financial and regulatory program concept developed by the Project. Phase II (January 1June 30, 2004) Phase II of the Project involved refining the concept paper idea through ongoing consultation with industry representatives, investment bankers, environmental organization, government agencies and regulators, and academic researchers. The Project produced a draft working paper, Financing IGCC3Party Covenant, February 2004, published as a John F. Kennedy School of Government working paper. The draft working paper presents extensive research on IGCC technology, performance, and economics, describes regulatory and financial issues impacting commercial deployment, and a refined description of the 3Party Covenant financing program. The Project held a seminar at Harvard University in February 2004, Integrated Gasification Combined Cycle: Financing and Deploying IGCC Technology in this Decade. The workshop was attended by leading experts from industry, government, academia, and environmental organizations to discuss the draft working paper and conduct a dialogue on IGCC deployment issues and opportunities. The Project produced a Rapporteurs Report summarizing the seminar, feedback received, and the list of attendees. Ideas and feedback received from the workshop and follow-up discussions were incorporated, along with considerable additional research, into a final version of the Project working paper, Deploying IGCC in this Decade with 3Party Covenant Financing, which was published July 2004 in two volumes by the John F. Kennedy School of Government. The paper presents a refined financing and regulatory proposal, expanded regulatory and technical research, and a thorough description of implementation opportunities, including the opportunity to reposition, as base-load capacity, certain existing natural gas combined cycle power plants by repowering them through the addition of new coal gasification systems. Phase III (July 1, 2004June 30, 2005) Phase III of the Project has focused on outreach, refinement of Project proposals, identifying implementation pathways, and a broadening of the scope of research to include industrial gasification opportunities. The first outreach effort was distribution of the final working paper report. Approximately 200 copies of the report were mailed to industry, state, and federal government, academic, environmental and other stakeholders. The report was also broadcast e-mailed to a significantly larger group of people and is available for download from the web sites of both DOE/NETL and the Belfer Center for Science and International Affairs at the Kennedy School. After its release, the Projects work was described by several energy and environmental reports, including Energy Daily and Greenwire. The authors were also invited to conduct a taped press briefing at King Publishing, the video of which is available on the web. An article by the Project authors was also published in the November issue of Forbes Magazine, and the Project was mentioned in the Wall Street Journal as part of a story describing AEPs plans to pursue development of an IGCC plant. In addition, the Project submitted a peer reviewed article to the Air and Waste Management Association that was published in the December 2004 EM magazine. The Project submitted an article to Public Utility Fortnightly that was published May 31, 2005. In addition to publishing articles and reports, the Project reached out to a broad group of stakeholders to discuss Project findings. Some of the groups the Project has been in contact with include: Industry: American Electric Power, Cinergy, Duke Energy, Peabody Energy, Dow Chemical, Eastman Chemical, Georgia Pacific, and associations for the chemicals, fertilizer, pulp and paper, glass and metals industries. Organizations: Gasification Technology Council, Global Environment and Technology Foundation, Indiana Energy Conference, National Commission on Energy Policy, Natural Resources Defense Council, Office of Ohio Consumers' Counsel, Princeton Environment Institute Government: DOE, Office of Policy, EPA, Office of Air & Radiation, Office of the Vice President, CEQ, Indiana Utility Regulatory Commission, Public Utility Commission of Ohio, Kentucky Public Service Commission, Pennsylvania Public Utility Commission. In December 2004, the Project began to turn its focus to important national energy policy implications of gasification. In particular, the Project began researching the potential impact of a broad National Gasification Strategy for helping relieve high natural gas prices and supply concerns. In January, 2005, the Project produced a Kennedy School of Government working paper, National Gasification Strategy: Gasification of Coal & Biomass as a Domestic Gas Supply Option, describing how a robust program to stimulate gasification for industrial and electric power use could reduce natural gas price pressure and reliance on overseas imports of liquefied natural gas. Shortly after publication of the paper, the Project submitted responses to questions posed by the Senate Energy Committee for a conference they were holding to solicit fresh ideas to address the natural gas situation. The Project was selected to testify at the hearing, which was held on January 24, 2005. On April 6, 2005, Senator Alexander introduced legislation, S.726 The Natural Gas Price Reduction Act, aimed at addressing natural gas supply and price concerns. The legislation includes a National Gasification Strategy for the Power Sector as well as an Industrial Gasification Demonstration and Deployment Program that include elements of the proposals produced by the Project. The Project continued to provide input on this legislation and testified in front of the Senate Energy Committee again on April 21, 2005, as part of a conference on the future of coal in the U.S. In May, 2005 the Project began working closely with the staff of Senator Salazar (D-CO) to help draft legislative language for a National Gasification Strategy bill. On May 20, 2005, Senator Salazar introduced S.1091, The National Gasification Strategy Act of 2005. Senator Salazars bill includes detailed provisions for providing loan guarantees for IGCC and industrial gasification projects as well as funding for carbon capture and sequestration demonstration projects. On May 26, 2005 the Senate Energy and Natural Resources Committee passed Title XIV of the 2005 Senate Energy billIncentives for Innovative Technologies. The Title contains provisions for federal loan guarantees for, among other things, IGCC power plants and industrial gasification projects. The Project was involved in helping Senate staff consider and drafting aspects of this Title. On August 8, 2005 President Bush signed the Energy Policy Act of 2005 into law. The Act contains significant incentives to accelerate deployment of gasification technologies for both power generation and industrial use, including a broad loan guarantee program for industrial gasification and IGCC. The Act includes provisions that closely parallel recommendations made by the Project, including availability of loan guarantees for 80 percent of project costs, requirements that projects have an assured revenue stream in order to qualify, and specific emissions performance requirements. The Project was thrilled to see its recommendations enacted into law and is now actively working to assist in their timely implementation. 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